Forget the tax problems. Here is what legislators really need to ask Obama's choice for Treasury secretary at Wednesday's hearing.

NEW YORK (Fortune) -- Taxes aren't the only question facing Tim Geithner.

Geithner, President Obama's choice as Treasury secretary, will appear before the Senate Finance Committee Wednesday morning.

The hearing was tentatively set for last week, but it was pushed back after it came to light that Geithner -- who as Treasury secretary would oversee the IRS -- had failed to pay in
timely fashion some $34,023 in self-employment taxes between 2001 and 2004.

Obama's team dismissed the tax problems as a "common mistake," and Geithner has since paid the required taxes and interest. Obama's chief of staff said Sunday the president
"absolutely" supports the nominee.

(Last week, Treasury announced that Stuart Levey, the Under Secretary for Terrorism and Financial Intelligence, would serve as acting secretary until a successor to Henry Paulson is
confirmed.)

When Obama announced in November that he intended to nominate Geithner, financial markets rallied. Observers applauded Geithner's experience, including the six years he has spent as
president of the Federal Reserve Bank of New York.

But the latest collapse of financial stocks - along with widespread dissatisfaction over the Bush administration's decision to lavish U.S. banks with
taxpayer funds with few strings attached - makes crafting a fresh response to the crisis a top priority for Obama.

The tax mess may have changed how some senators will approach the hearing. Still, even Geithner critics doubt the Senate will press the nominee very hard on critical issues, such as
his role in the financial rescues of the past year and the government's failure to offer a full accounting of its actions.

"The Senate has a chance to probe some very important matters, but it looks like Geithner is likely to be handled gently," said David Kotok, chief investment officer at investment
adviser Cumberland Advisors in Vineland, N.J.

Here are some questions senators should ask Geithner:

Why did the government save Bear Stearns but let Lehman Brothers fail?

Wednesday's hearing offers a long overdue opportunity to explain the government's actions over the past year.

Kotok said a crucial question is why the Federal Reserve stepped in to engineer a rescue of Bear Stearns, which was sold to JPMorgan Chase in March with $29 billion of federal aid --
while letting Lehman Brothers fail in September. Both investment banks were so-called primary dealers, institutions that trade directly with the Fed.

"The primary dealers have been viewed around the world as trustworthy and as a conduit of Fed policy," said Kotok. "When Lehman failed, that called into question the sanctity of the
primary dealers -- and triggered the contagion that put 25% of the world's wealth in the trash can."

Why wasn't the government better prepared for the fallout of Lehman's failure?

Geithner, as president of the New York Fed, was responsible for overseeing primary dealers such as Lehman. Six months elapsed between Bear's failure and Lehman's Sept. 15 Chapter 11
bankruptcy filing.

So what were regulators doing in those six months? And why did they seem to be caught off guard by developments following Lehman's failure, such as the flight of investors from money
market funds that held billions of dollars of Lehman debt?

Why is Geithner the right person to oversee the restructuring of the financial industry?

Obama has promised to oversee what he called a "substantial overhaul" of financial markets and U.S. regulatory structures.

But some observers question whether Geithner has the right stuff for that task. After all, he was one of the nation's top three regulators during a stretch in which the financial
markets surged and then plunged, largely due to the fact that U.S. financial firms loaded up on unsuitable, risky investments -- and regulators did little to stop it.

Timothy A. Canova, professor of international economic law at Chapman University School of Law in Orange, Calif., said Geithner needs to show legislators that he is clearly
independent of the companies he oversees - and that he is willing to make a break with the failed regulatory policies of the past.

"This whole crisis has in large part been a failure of regulation, just as much as a failure of the marketplace," said Canova. "We need to get a real conversation going about how to
do this right."

What can the U.S. do to rebuild its reputation as the most trustworthy and best regulated financial market in the world?

The scandals and market crashes of the past 18 months have taken an enormous toll on America's reputation around the globe.

To help restore that confidence, Geithner will have to be above reproach and will need to be counted on to aggressively police the financial industry and other possible wrongdoers.

"There's no innocent explanation for what has happened," said Janet Tavakoli, a finance industry consultant and author of "Dear Mr. Buffett," an accounting of how risky assets,
leverage and fraud led to the collapse of the financial economy.

She said Wall Street wholeheartedly embraced risk and leverage during the credit bubble earlier this decade, and that many big firms sold securities knowing full well they would go
bad.

So far, no one has been brought to justice for this. That means that Geithner must prove that he will be an able steward of what Tavakoli called "the public trust."

Serious as those problems are, they also offer the next Treasury secretary an opportunity to change the financial system for the better.

But to take advantage of these troubled circumstances, Geithner will have to start Wednesday by showing senators his commitment to "integrity and transparency," said Kotok.
"Explanations need to be given."